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The NAVIGATOR - NOVEMBER 2018 - Stock Markets Hit Major Lows in Late-October – Intermediate Wave (3) On-Target for Record Highs in H1 ’19 – EM’s Complete Major Correction

Stock markets turned-up the volatility pressure during October’s sell-off which saw the benchmark S&P 500 decline by -11.45% per cent, compared to January/February’s decline of -11.8% per cent. The intervening advance from February to October registered gains of +16.0% per cent making a total annualised swing to-date of 39.25% per cent – if you were lucky enough to capture some of this, then you’ve had a great year! This month’s EW-Navigator report updates how these price-swings fit into the developing picture – one thing’s for sure, more volatility is likely in the months ahead. Industry data suggests a lack of participation in the stock market’s recovery from February’s lows, probably because fund managers were still wary of adding long-positioning after sharp declines – this was exacerbated following October’s sell-off which has made investors even more cautious. Ironically though, Elliott Wave analysis has identified a major bottom into that late-October low – we’re now really bullish for the next several months and this report updates tells you why. Emerging markets are also exposed but look great following severe declines this year. In our sector analysis, Consumer Staples XLP which triggered a buy signal last May is up +14% and we still like this uptrend.

In Currencies, we take a look at the current location of the US$ dollar and assess its chances of pulling lower back inside its June-October trading range before heading higher in one final push to complete this year’s corrective rally, or whether it is already engaged in that final push through to year-end. We update the Euro/US$ and many peripheral EM currencies with some amazing results including the Canadian Dollar US$/CAD, the Mexican Peso US$/MXN, the Chinese Renminbi US$/CNY, Brazil’s US$/BRL, South Africa’s US$/ZAR, Russia’s Rouble US$/RUR and Poland’s Zloty US$/PLZ.

U.S. interest rates are still heading higher, but in what pattern formation and what extent can this current uptrend reach to? We have the answers! The US10yr yield began a new multi-year uptrend from the all-time-low of 1.316% in July ’16. Whilst the Federal Reserve seem content to follow a programme of incremental rate increases, Elliott Wave analysis highlights some major obstacles not too far above current levels. The US05yr and US02yr yield uptrends are confirming our analysis which indicates a U-turn may lie ahead for Q1-2019.